This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Focus Point Holdings Bhd (KL:FOCUSP), operator of Malaysia’s largest optical retail chain store, has been growing from strength to strength in the past few years despite having to face rising costs of doing business while inflationary pressure weighs on consumer spending.

In the financial year ended Dec 31, 2023 (FY2023), apart from successfully transferring its listing to Main Market from ACE Market, the group posted another record high revenue of RM260.9 million, up 4.9% from its previous peak of RM248.82 million achieved in FY2022. Although net profit dipped to RM30.15 million in FY2023 from RM35.86 million in FY2022, the group’s earnings remained above RM30 million compared with the RM14 million it made in FY2021 and the RM10.6 million it posted in FY2020.

The second consecutive year of record revenue was driven by higher sales from newly opened optical outlets, the full-year sales of outlets it opened in 2022 for the optical segment and strong growth in corporate sales achieved in its food and beverage (F&B) segment.

The group was also making good use of funds invested in the company as shareholders’ funds grew from RM68.3 million in FY2020 to RM75.8 million in FY2021, RM101.7 million in FY2022 and RM118 million in FY2021. It recorded a return on equity of 19.5% in FY2021, which jumped to 40.41% in FY2022 before easing to 27.4% in FY2023.

That led to a weighted return on equity growth of 29.7% over the FY2021-FY2023 period, which clinched Focus Point the Highest Return On Equity Over Three Years award under the consumer products and services category of The Edge Malaysia Centurion Club Corporate Awards 2024 — the second straight year it has won the award.

The group appears to have started its FY2024 on a good footing as it recorded earnings growth in its first quarter ended March 31, 2024 (1QFY2024), with net profit rising 23% to RM7.41 million from RM6.03 million in 1QFY2023 as revenue climbed 14.5% to RM68.3 million from RM59.67 million.

The group, which hails from Muar, Johor, has expanded significantly since its establishment in 1989, including its ACE Market listing in 2010 and subsequent transfer to the Main Market in January last year. From a small counter within a shopping mall in Muar, the optical group runs nearly 200 outlets nationwide today and employs the highest number of optometrists and opticians in Malaysia.

It is also known for its F&B segment, which it ventured into in 2012 when it started its first Japanese concept bakery store Komugi in Kuala Lumpur. In 2019, the group expanded beyond the bakery retail business to include the supply of pastry products to large corporate customers with its halal-certified central kitchen in Kota Damansara.

Although Malaysia’s economy is expected to grow between 4% and 5% this year, Focus Point noted in its latest quarterly disclosure to the stock exchange that continued inflationary pressures may impact consumer spending.

“Given the current economic sentiment, the board expects the group’s prospects to be challenging but is confident in the group’s ability to sustain the growth momentum in the forthcoming quarters.

“Moving forward, the group intends to leverage its market leader position in the optical and related products segment, and has planned to expand its presence locally by opening new outlets in strategic locations to drive sales growth,” it said.

Analysts seem relatively optimistic on Focus Point, with all three coverages on the stock having a “buy” rating as at June 25, according to Bloomberg, with a consensus target price of RM1.12.

In a June 19 report on the consumer product sector, RHB Research, which has a target price of RM1.12 for Focus Point, named the group as one of its sector top picks, given the prevalence of myopia among Malaysians.

“We highlight Focus Point for its industry-leading growth, underpinned by effective marketing initiatives and rising myopic population,” it said.

TA Securities, which had a RM1.11 target price on Focus Point based on a June 25 report, said the anticipated higher tourist arrivals to Malaysia would also boost sales at its eye care centres and food outlets.

“The group has 20 outlets in Johor that will benefit from Singaporean travellers, besides outlets in KLCC, Genting Premium Outlets and Design Village in Penang that are prone to be tourist hot spots,” it noted.

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